Q4 2019 Earnings Call
Thank you for standing by this is the conference operator, welcome to the Eldorado Gold Corp. fourth quarter, and 2019 year and results conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
Sure the presentation, there will be an opportunity to ask a question.
To join the question Q you May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal and operator by pressing star and zero.
I'd now like to turn the conference over over to Peter leakage manager Investor Relations. Please go ahead Mr. really gets.
Thank you operator, thank you ladies and gentlemen are taking the time to dial into our conference call today.
With me back or would this morning, our George Burns President and CEO.
<unk> executive Vice President and CFO.
Joe deck executive Vice President and COO, Paul Skayman Special advisor to the COO adjacent show Executive Vice President and Chief strategy Officer.
Our release yesterday details, our 2019 fourth quarter and year end financial and operating results.
They should be read in conjunction with our fourth quarter and year end financial statements and management's discussion and analysis.
Which are available on our website.
They have also been filed on SEDAR and Edgar.
All dollar figures discussed today in U.S. dollar unless otherwise stated.
We will be speaking to the slides that accompany this webcast you can download a copy of these slides from our website.
Before we begin I would like to remind you that any projection is included in our discussion today are likely to involve risks which are detailed in our 2018.
And in the cautionary note on slide one.
Now I'll turn the call over to George.
Thanks, Peter and good morning, everyone.
It's fantastic to see the response to our released this morning.
Here's the format for todays call.
I'll give an overview of the highlights along with some comments.
Then I'll pass it over to fill to go through the financials.
Oh, well followed by reviewing operational performance and Joelle say a few words on 2020 plans.
Then we'll open it up for questions.
Before we get into things I want to say, a warm welcome to Joe or new COO.
Joe has been with us for a few months and it has had the opportunity to spend some time other sites.
He joins us from Newmont, where he was SPP for Latin America.
He also has experienced with Barrick and Rio Tinto.
Welcome Joe.
Moving onto the highlights on the next slide it was another solid quarter.
Both operationally and financially.
We produced a record 118955 ounces gold or highest quarterly production and nearly four years.
This was a result of increased production that will mark and Kisladag.
Consolidated annual gold production came in on plan and we ended the year with.
Over 395000 ounces or highest total production in three years.
Gosh operating cost remained steady.
Looking back 2019 was a pivotal year and El Dorados 25 year history.
We put our first Canadian mine into commercial production.
We restructured the balance sheet and reduced our total debt by 100 million U.S. dollars, we receive long awaited permits in Greece.
On top of these accomplishments our cornerstone asset kill Saddam is now back on track.
We're confident that the results of recent test work support an extended mine life of 15 years.
I'm proud of the benefit.
It will come to local communities.
And the Greeks.
Sorry about that Kisladag will once again provide long term value for Eldorado stakeholders.
Over degrees our team is working with Ministry officials to advance our investment.
To recap we have received the skouries construction permits that held us up since 2017.
However, an updated investment agreement and permits for dry stack tailings are essential for the advancement of the investment in restarted the project.
Revised investment agreement will not only provide a stable platform irrespective of future governing parties. You would also help and demonstrating greece's commitment to working with foreign investors in order to attract capital needed to grow its economy.
Just to remind everyone. We view Skouries is a world class asset that will create approximately 1000, well pellington paying jobs over its current 23 year mine life and generate significant tax and export revenues.
For the benefit of local communities and the Greek state.
Before I hand, it over you may have notice that our logo a slightly different throughout this presentation.
This refreshed logo is reflective of the evolution of our business and the new path forward.
The new Green color highlights the company's continuing commitment to put sustainability at the core of our business.
As evidence of this we're currently building a global sustainability management system that outlines the common set of performance standards by which we will operate.
This will allow us to simplify or existing systems through harmonizing. The way. We do things you will also improve efficiencies and consistencies across our business that will drive productivity.
That's it for me over to you Phil.
Oh, Thank you George good morning, everyone.
Starting on slide four we provide an overview of Eldorado gold financial results for the fourth quarter and your ended December 30, Onest 2019.
El Dorado generated 191.9 million in total metal revenue in the fourth quarter.
This includes 176.1 million in gold revenue.
And is an increase of 170% over the comparative quarter in 2018.
The increase resulted from higher gold sales volumes of 118900 ounces versus 58 860 into four of 2018.
And a higher realized average gold price into fourth quarter, a 1400 $75 an ounce versus 12 45 per ounce in Q4 2018.
For the full year 2019, Eldorado generated total metal revenue of 617.8 million.
I would say 530.9 million what school revenue.
This represents a 35% increase over 2018 and also resulted from higher gold sales volumes and higher average gold price in 2019.
Net earnings to shareholders in the fourth quarter was 91.2 million or 57 cents per share compared to a net loss to shareholders up 218.2 million or dollar 38 loss per share in the fourth quarter of 2018.
Net earnings in the fourth quarter reflect an impairment reversal of 85.2 million or 68.2 million net of deferred tax.
For the kids to the leach pad and related assets.
Selecting the Kisladag mine life extension to 15 years.
There was also an increase in depreciation in the fourth quarter in line with increased sales volumes.
Loss in the fourth quarter of 2018 included an impairment adjustment of 330.2 million or 247.7 million net deferred tax which is related to olympias.
For the full year 2019, net earnings to shareholders was 80.6 million or 51 cents per share.
<unk>, reflecting essentially the same drivers as outlined for the fourth quarter. This represents a significant improvement over the full year 2018, net loss of 361.9 million or $2 in 28 cents loss per share.
Adjusted net earnings for the fourth quarter was 20.3 million or 13 cents per share, which was a significant improvement over the fourth quarter 2018, adjusted net loss of 18.9 million or 11 cents loss per share in both periods net earnings were adjusted primarily to remove the impairments.
And the impairment reversal.
For the full year 2019, adjusted net earnings were 5.6 million or four cents per share adjusted to adjusted net loss of 28.6 million or 17 cents loss per share for 2018.
The strong sales in the fourth quarter resulted in EBITDA of 158.7 million and adjusted EBITDA of 80 point Threemillion.
And improvement over the last before interest taxes, depreciation and amortization of 327.9 million and adjusted EBITDA of 9 million in the fourth quarter of 2018.
For 2019, EBITDA amounted to 300 Lovely point Threemillion and adjusted EBITDA was 235 point Sixmillion.
This is compared to last before interest taxes, depreciation and amortization of 361.8 million, an adjusted EBITDA EBITDA of 99.6 million for 2018.
Again adjustments were primarily the impairment items discussed earlier.
Fourth quarter also represented a third consecutive quarter, a positive free cash flow.
To achieve a commercial production out of the Mark at the end of March of 2019.
Finance costs were 8 million in the fourth quarter and 45.3 million for the year compared to five point sixmillion for the full year of 2018.
The significant increase in 2019 over 2018.
Primarily reflects interest no longer capitalized following the commencement of commercial operations that luck in the second quarter of 2019.
And the transfer of Scurry us to care and maintenance at the end of 2018.
Income tax expense amounted to 39.8 million for 2019 compared to a tax recovery of 86.5 million in 2018.
The tax expense in 2019, primarily relates to income tax on operations in Turkey.
And money duties for them OCC.
Deferred tax recoveries in 2019 relating to fix asset movements currency movements and a corporate tax rate reduction in Greece, we're almost fully offset by a 17 million deferred tax expense as a result to the impairment reversal for kisladag.
The tax recovery in 2018 primary primarily resulted from the impairment charges in that year.
Depreciation and amortization increased 253.1 million in 2019 from 105.7 million in 2018.
Reflecting the increase the sales volumes in 2019 as well as the commencement of commercial operations at Lamarck during the year.
Eldorado reported 64.2 million a net cash generated from operating activities in the fourth quarter.
<unk> <unk> and 165.8 million for the full year 2019.
This was also a significant increase from the fourth quarter of 2018, a 4.9 million 67.5 million for the full year 2018.
We finished the year with approximately 366 million in available liquidity.
Oh. This 180 881 million was in cash cash equivalents and term deposits as at December 31, 2019.
At approximately 185 million remained available under the $250 million revolving credit facility, which remains undrawn.
Approximately 65 million of this facility is allocated to secure a certain reclamation obligations in connection with our operations.
I will now I'll turn it over to Paul for retail operations. Thanks Bill.
I Love to write code George's comments and welcome John Board as well.
It's a quick summary about quarterly and year to date operating results.
As George mentioned, we produced 119955 ounces of gold in the quota a cash operating costs of $621 per ounce Sol and all in sustaining cost of $1110 per hour. So.
This was more or less inline with expectations.
Similarly production for the year was also in line with expectations. We produced 395331 ounces at a cash cost of $609 per ounce, an all in sustaining cost of $1034 per ounce.
This was our highest total production nights in three years.
Looking forward.
Twentytwenty production is expected to grow approximately 35%.
Well casting annual production of between 520, and 550000 ounces of gold I catch costs of 500 $5600 per ounce and.
And all in sustaining cost of 850 to $950 per ounce in Twentytwenty.
We expect [noise].
Excuse me.
We expect lower all in sustaining costs than 2019 actuals. That's production is expected to increase this year.
That's it for me short section this turnaround.
At a joke.
Thanks, Paul and good morning, everyone.
It's a pleasure to be part of the Eldorado team, especially at such an exciting time in our business.
I'm going to slide six well get to look at our five year outlook.
For your production figures remain the same were 2020 as what you saw in January 2019.
And as we've talked before production will decrease in 2021, as we mine lower grade at Kisladag.
What I want to highlight as our sustained annual gold production beyond 2020. This is a sizable improvement over what you saw last year.
In addition to the mine life extension at Kisladag, we are forecasting a step up in production and the Mark to 150000 ounces per year through accelerated development.
This does require an expansion to the existing permit for triangle underground extraction rates.
We're also forecasting an increase in production from Olympias and we'll discuss that.
A bit further later in this call.
Post 2020, we're now forecasting an annual average of over 450000 ounces of gold per year for more base operations and our key development projects provide potential growth to this production profile.
[noise] over to Kisladag on slide seven.
The headline at Kisladag is an average of 160000 ounces of gold.
Per year for 15 years.
The project is self funding and Reestablishes kisladag as a cornerstone of our company.
As you May remember that company announced in January 2019 that wouldn't suspend work on the mail in favor of resuming mining crushing and heap leaching.
The company also announced that it would continue test work on deeper material at Kisladag to see how it responded to longer lead cycles with the aim of extending mine life.
Later in 2019, the company announced that given the test work to date. It did expect to extend the mine life at Kisladag.
Additionally, the company conducted high pressure grinding role or HPG, our test work on several books samples.
These samples were then tested to see how they would perform under a 250 day leach cycle.
Results of the test work indicate that a combination of HPG, our and longer lead cycles will yield recoveries of approximately 56%.
This test work now complete and coupled with extensive test work covering the remaining reserves, we have a comprehensive understanding of how the ore body will behave going forward.
As a result, we collectively are confident very confident in our new mine plan.
A 43, one or one compliant report confirming our new reserves of over 4 million ounces of gold will be published before the end of this quarter.
Looking at slide eight we haven't outline showing the scale of the new pit looking to the north.
The darker yellow is the existing pit mine to date and the shaded yellow is the new reserve pit.
This new pit contains 173 million tons of ore.
Resulting in a 15 year mine life.
Slide nine takes us to Lamar.
Our guidance for the mock increases to approximately 150000 ounces per year by 2022.
We will achieve this by increasing our mining rates to roughly 2200 tonnes per day, which is the current capacity of the Sigma mill.
This expansion requires no incremental capital and is simply accelerates underground development.
Eldorado will continue study to study ways to optimize the triangle deposit.
Initially we will focus on the decline from triangle to the Sigma mail following that we will look at de bottlenecking, the mail and a long term tailings solution to enable us to go beyond 2200 tonnes per day.
With the recent discovery.
Of the IMAX zone and continued exploration success at triangle.
The company has the bird recent release of a P.A.
I feel that incorporation of new information into this study will allow us to better scope the full potential of Lamar.
Onto olympias at slide 10.
[laughter].
2019 was disappointing.
MPS finished the year with lower production and higher costs than plan.
However, we did establish a positive trend in the second half of the year by improving the underground development and backfill cycles.
During 2020, we will continue to focus on development and include additional initiatives aimed at further enhancing our productivity.
The guidance, we have issued shows continued positive trend and shows we're expecting to achieve higher production at lower costs than 2019.
We expect continued progress beyond 2020, resulting in improved cost performance overtime.
We still have a ways to go Atlanta at Olympias.
But we are making progress and we expect the necessary step change in productivities over the next two years.
On that basis, our five year plan includes an expansion at olympias to 650000 tons per year.
Further details on the expansion will be outlined in a technical study that will also be published by the end of this quarter.
With that I'll turn it back to George for closing remarks.
Thanks, Joe.
Before wrapping up I want to take a moment to thank our global teams for their collaboration and drive in 2019, particularly the Kisladag team for putting the mine back on track and Limbach team for an excellent first year.
Together, we achieved multiple significant milestones, making it a pivotal year for El Dorado.
I'm very proud that we delivered our highest annual production in three years, while maintaining steady operating costs.
We expect this positive momentum to continue with 2020 production forecasted to grow to between 520 550000 ounces.
The expected increased cash flow will give us options to invest in our growth projects and pay down our debt.
We will continue to put safety sustainability and governance at the core of our business as we seek ever better ways to operate.
Thank you everyone.
I will now turn it over to the operator for questions.
We will now begin the question and answer session to join the question Q You May Press Star then one on your telephone keypad, you will hear Italian acknowledging your request. If you are using a speakerphone. Please pick up your handset the far pressing any keys to.
To the draw your question. Please press Star then too well pause for a moment as collars join the queue.
The first question comes from Mike Parkin with National Bank. Please go ahead.
Hi, guys. Thanks for taking my questions.
What the Olympias expansion study coming out.
Should we be looking for that largely to be the addition of the ball mill that you've spoken to in the past.
Yeah, that's correct, but there's some subtle.
I will change as elsewhere in the plan, but but the major the major changes that addition of a ball mill.
So are we still thinking on capex somewhere around 20 million Bucks 25 million.
Yeah, let a little bit more than that Mike, but but not not significant.
Okay.
Where do you see a opex per tonne on an overall basis kind of trending.
Yeah, whatever percent dropped from where it's kind of been a or however, you want to kind of communicate it with that expansion.
I see that we'd be looking in the plus 30% improvements in opex roughly.
Perhaps more.
I guess, you get a double whammy, good you're increasing your lead and zinc as well so that makes a big difference to a touch operating costs yeah.
Okay and then.
Kishore day.
Just give us a or an update on the fleet. There said owner operated and if it is what's the condition of it now that you're looking at such a massive mine life extension there will there be a need to replace the fleet in the next few years.
The fleet is owner operated and we don't see a need to replace the fleet. The cat trucks will run to about 150000 hours and the Hitachi is somewhere just shy of 100.
Okay.
And then just the last one for me.
Now that you've got such a long sustainable half million ounce production base does that change your thoughts towards Skouries in terms of a need for third parties now that you're you've got longevity within the asset base that's producing.
No our strategy remains unchanged step one is to finalize an agreement with the Greek stake on Investor Productions and.
Permits for.
For the Skouries, a dry stack tailings redesign and and then to work on financing and and our primary strategy is to find a partner and.
Two significant reasons for that one is is funding we view it strategically the right path forward for Eldorado to have a partner to to fund remaining capital to have skouries brought into commercial production.
And second just portfolio management of risks so that strategy remains unchanged.
All right and that's it for me guys. Thanks, and congrats on the life of mine update for Kisladag that's great.
Thanks, Mike.
The next question comes from Kerry Smith with Haywood Securities. Please go ahead.
Thanks, operator.
Joe or or Paul do you need in.
Incremental permits for the kitchen Bank New mine plan.
No. We don't carried that they are the plan still fits within the footprint of the original expansion.
Area.
Oh, good in terms of what we're planning to do from that standpoint.
Okay, and then you still need to relocate the crushing infrastructure because it'll fall into Penthol right.
No we done they the north side actually doesn't move so there's a little bit of infrastructure or yachts associated with sort of my ball equipment et cetera, but but the crusher will stay where it is and most of the offices et cetera stay where they are as well.
Okay, Okay, and just to follow up on Mike's question, then no new gear and needed.
All of that plan will just be rebuilding the equipment as time goes on and it will last for life project that.
Yes, that's correct, okay and or Korlym, yes.
The thing the current I'm not sure I know the current plan was 420000 tons a year, but I'm not sure what the permit was for do you need to permit there to go to 650000 tons here.
Yes, we will need to permit to increase to that level. We're currently authorized for free.
Okay.
Okay. So and so is that apparent that is that an amendment or is that something that you think will take a long time to actually achieve.
Well, it's a amendment to the existing permit and that's.
Our our production ramp up is consistent with our expectations on permitting there.
Okay.
Okay, great and and I guess on Olympias just.
You're always see.
Finally on the cost side there have been annual this year, you've got a forecast for I think it was 800 to 900 announced for cash costs.
I guess last year they were north of 1200. So just in simple terms what are you doing to get those costs lower.
So so presently as I mentioned, we are working on development cycle, we brought in a development contractor to help us pickup there. We are continue to work on backfill cycle and.
More more volume in pace and.
Capped style feel we're also doing a couple of kind of minor projects.
Underground and to help us with maintenance facilities and pumping facilities underground and then and then really the majority of it is likely to be non technical and more.
You know sustained leadership and improvement of basic operations and and operational standards. So it's it's pretty basic stuff.
Okay. Okay. That's great. Thanks, very much guys congratulations on that.
Onetime.
Thanks, Gary.
The next question comes from Tanya Jakusconek with Scotia Bank. Please go ahead.
Hi, Good morning, everybody I'm just wanted to circle back on Kisladag, if I could I'm just wanted to ask George and I think on the last conference call. We talked about the H.P.G. are tied to the option for Kisladag and we talked about the fact that you were kind of going through it and parallel but.
You need more time and likely have made at the end of 2020 tatlock clarity I was a bit surprised to see that this is the option that they went with can you just talk about Tom what changed over the over this period.
Sure Tanya So if you go back a year.
A year ago, when we did the the first round of HPG our test.
Those tests didn't give us a lot of information that we basically over crushed.
Too many finds in the product and we're unable to get solutions through the call them. So.
It was.
Those results weren't very positive I.
I think for US I mean, these HPG our test require large samples.
We were able to run multiple samples through multiple suppliers, we've done the leach test work and.
We now know.
Range by which we can put energy into crushing and fracturing of of the rock to optimize recovery and at what I would describe for you is the results came back very positive.
And consistent and and.
What we have in our our outlook and what you'll see in the upcoming technical study or are solid consistent results.
I'd also mentioned that Theres still some upside remaining we.
We know we can push the circuit harder and create.
Access to additional gold.
Just trying to.
Fine that optimum position between particle size and not pushing it too far where you have a permeability issue. So I guess, what I'd tell you the surprise was.
With these new results were able to find that that sweet spot to be and and I think we've landed on a conservative case that we're confident we can deliver and there are some some upside to be able to push that.
That circuit, a bit harder and perhaps push that cover a slightly above the 56%. We now have in our and our life of mine assumptions.
Okay. So just so I understand correctly, what was it George that you when we did the conference call and and now I guess what November when you were still looking at cash like a year ago and is it that you've done new testing from from over the last quarter on the H.P.G.R. that.
Thank you that's comfort level.
Yeah. Those test results just came in.
End of the new year, and those results were dramatically consistent and positive so.
Yeah, we didn't want to give the market a positive outlook duly have data to support a then and I would say for myself I was surprised it dramatically came back so positive and.
When you look at it we over crushed a year ago, we now have data to support.
What others have in the industry, saying that this technology can actually.
Improve fracturing and and improved recovery in the leaching scenario.
Okay. That's it was just a change of these results that you got from from now Bendeka today.
Yeah dramatic change in the.
Although the test results.
Okay, and then maybe just moving on to tell I'm, just a permit that we need at Olympias you know George where are we in terms of the whole permitting aspect with Greece I know that you know we were looking to get to ONTAP permits at several operations Perama Hill just adjustments.
Always on some of that Paramount and now Olympias have we started the permitting process on all of these.
Yeah, I mean, yes, we're engaged with the griggs.
Stayed on permitting strategy and on our side.
In various stages of engineering and design.
And.
The Greek safe side, we're in agreement on the method in the and what's required to get these additional permits so I would describe it as we're we're progressing down that line and expect to have good progress this year.
Okay. So so you've kind of taking the approach as well with the government seeking permits on all of them at the same time.
Yeah, they're all tracking it a different pay so I'd say the the skouries dry stack tailings ahead of the others from a.
Progress perspective, but they're all they're all moving in the direction to support the assumptions in our life of mine plans.
Okay.
And then maybe just moving to the Mac, if I could I think on the call I heard that calling from 1800 tonnes a day 22, and the requires no additional capital except for underground development.
And what I, what a amount of underground development that will be a client.
It's really it's really more just to speed up all the planned development time yet.
So it's not a it's not opposed <unk>, an extra capital it would just be bringing gotten development forward and so you can look at it as you know if we were running 20% pasta will have 20% more development effectively.
Okay.
And then they'll go into the 2500 tonnes a day, though I think that one would require the capital I think on the mine tore we had talked about additional capital if we like to go to that level.
Yeah, we're still focused on a Prefeasibility study engineering and the second half of the year and that will study the decline the crusher conveyor.
Subsequent mill upgrades required to pushes past 2200 tonnes, a day and eventually a long term tailing solution that wouldn't be paced underground. So that that work is continuing and we'll have those results in the second half and determined.
Next steps for the Mark in terms of growth capital.
Okay, and again, we need to men of Paramount to go to 2200 correct.
Yeah, I mean, we filed the permit to expand the triangle production daily rates from 1800 tonnes. A day to 2600 today that was filed in December we've seen all of our permits that limbach come in timely as expected and.
And for see that around the middle of the year.
Okay, well ahead of our needs.
Perfect. Thank you.
Thank you.
Once again, if you have a question. Please press Star then one.
This concludes the question and answer session.
I would like to turn the conference back over to Mr., George Burns for any closing remarks.
Well. Thank you everybody it's been a.
Remarkable day for US a look forward to catching up with you shortly on our Q1 results.
Have a great day.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
[music].
No.
[music].
Hmm.
[music].